Control or growth (Part 4)

__My first “Olympic Gold Medal”… in venture capital!
As I’ve often said before, you must listen to your business plan. It will tell you what kind of capital you need. After running my business for about four years using loans and supplier credit, I knew I needed to get equity capital, if I was to continue to growth and get to the next level.I ran an electrical engineering business employing about 500 people. I knew I had the skill to build an even bigger business, and perhaps even begin to expand to other African countries in the region. I needed equity capital which would spare me paying bank interest, and allow me to grow for a few years before I could go for a public listing: my dream!

“But how do I sell shares, and who would buy?”

I already knew the type of equity capital I needed. It was called “venture capital,” but everyone I spoke to in Zimbabwe had no idea what I was talking about. That was 1990, after all, and I was just turning 30 years old.

I was treated with a combination of derision and even suspicion. And as I will show you later, it almost cost me my life!

“The World Bank has a private sector arm called the International Finance Corporation which mostly finances very large businesses, but they are thinking of setting up a venture capital fund to help small businesses and African entrepreneurs,” said the article. (Yes, I still always read the newspaper with a pen in my hand!)

“Venture Capital Fund for Africa!” I was screaming and shouting: “This is for me!”

I wrote to them. Within a few weeks, I got a phone call, and for sure they were interested in talking to me.

“Do you have a business plan?” asked the guy from the World Bank Office in Washington. His name was Dr Lawrence Clarke. He was young banker from Guyana in the Caribbean, and was so intrigued that I had heard about it.

“You will probably be the first, because we are just setting it up.”

Fast forward:

Lawrence Clarke arrived to Harare to begin a due diligence process, which included seeing my customers and visiting my projects. He worked out of my office for weeks, creating models, and they even hired an engineer from Uganda to review my business. His name was Ibrahim Waligo, and he had at one time acted as President of Uganda during the transition from Idi Amin.

It was like being on Shark Tank for six months continuous, and . . . I made it! I got my $250,000 equity and debt facility for a 25% stake.

It was big news. I made the national press.

__For an entrepreneur at my stage, this was like winning an Olympic Gold medal!

“Mama, I’m in the newspaper! The World Bank is investing in my company!”

The Minister of Finance, Dr Bernard Chidzero, called me about it, and invited me to his office. He congratulated me, but warned that not everyone else in government understood how important it was for the country. He seemed concerned for me, and I was soon to find out why.

A few weeks later, I was first followed by a vehicle, then picked up in my office by two armed men who told me they were from the Central Intelligence Organisation, or the dreaded “CIO”! They took me to a secret detention center where they interrogated me for hours, asking me over and over again about the funding and why “America was supporting me”!

It was a terrifying experience. I was bewildered and confused, as they threatened to kill me! When my abductors went outside, I kneeled down and prayed.

Following my abrupt release (due to the intervention of a relative who worked for the then President), I was told it was a “rogue element within the agency”! No one was arrested, and they never seemed to end their “investigations” on anything I did.

I was a marked man, and within a few years, after some even more dangerous run-ins, I decided to leave the country to pursue my (entrepreneurial) career elsewhere. That was nearly 20 years ago now.

Well, this was about entrepreneurship. I got my first equity investment and I was on a roll. I had already set my goal on the next key milestone: a listing on the Zimbabwe Stock Exchange, but that would also be on a path of fire.

To be continued. . .

 

by 21 Replies

About Strive Masiyiwa

Strive Masiyiwa is the Founder and Executive Chairman of Econet, a diversified global telecommunications group with operations and investments in over 15 countries. His business interests also include renewable energy, financial services, media and hospitality. Masiyiwa serves on a number of international boards, including Unilever, Rockefeller Foundation, the Council on Foreign Relations’ Global Advisory Board, the Africa Progress Panel, the UN Secretary General's Advisory Board for Sustainable Energy, Morehouse College, Hilton Foundation's Humanitarian Prize Jury and the Kenjin-Tatsujin International Advisory Council. He is one of the founders, with Sir Richard Branson, of the global think tank, the Carbon War Room, and a founding member of the Global Business Coalition on Education. Masiyiwa took over the Chairmanship of the Alliance for a Green Revolution in Africa (AGRA) from Kofi Annan. He is also Chair of the Micronutrient Initiative, a global organization focused on ending child hunger and improving nutrition. In 2012, Masiyiwa was invited by President Obama to address leaders at the Camp David G-8 Summit on how to increase food production and end hunger in parts of Africa. In 2014, Masiyiwa was selected to Fortune Magazine’s list of the “World’s 50 Greatest Leaders”. As a philanthropist, he is a member of the Giving Pledge, and his contributions to education, health and development have been widely recognized. Masiyiwa and his wife finance the Higher Life Foundation, which provides scholarships to over 42,000 African orphans. In 2015, he was the recipient of the International Rescue Committee’s Freedom Award and was presented with a UN Foundation Global Leadership Award for the work of the Africa Against Ebola Solidarity Trust, which he chairs and helped establish to fund the deployment of African healthcare workers to combat the outbreak in West Africa.

21 thoughts on “Control or growth (Part 4)

  1. Strive Masiyiwa Post author

    Afterthought 1.

    Today, there are funds out there similar to the one that the IFC had set up back in 1990. It’s much easier now with the Internet for you to do research and find them. Some have millions of dollars, looking for people like some of you. I hope you already know about the African Leadership Academy blog, which has some articles of specific interest to entrepreneurs, and a few related to funding: http://www.africanleadershipacademy.org/category/thought-leadership/youth-entrepreneurship/

    Reply
  2. Strive Masiyiwa Post author

    Afterthought 2.

    There are many places to learn more in-depth about the ins and outs of venture capital. For example, in May this year, there’s a one-week intensive executive education program at one of the world’s top business schools, The Wharton School, in Philadelphia, USA. The tuition is high indeed (and I am not promoting it specifically). I just want you to see the kind of subjects they cover and that, wherever you’re from in the world, you’ll find entrepreneurs paying some serious money to study this subject. Go online and also check out universities where you live and see what they might have on offer. Here’s a link to check out the one at Wharton: https://executiveeducation.wharton.upenn.edu/for-individuals/all-programs/venture-capital.

    Reply
  3. Strive Masiyiwa Post author

    Afterthought:
    I’m currently in Israel, and yesterday I spent time at an organization called Jerusalem Venture Partners (JVP). This is one of the key organizations behind the push to create wealth and jobs by supporting entrepreneurs with Venture Capital funding and technical assistance. Many of the companies they supported are now listed on NASDAQ in the United States. This is not a government initiative but was started by one of the most extraordinary entrepreneurs I have ever met. His name is Erel Margalit (please look him up on Wikipedia).
    This visit reminded me of my visit to California in 1991, and China in 2008.

    I am here to learn:
    I’m keen to help establish similar initiatives in Africa. This is part of my study tour.

    Please study their websites and give me your views on whether you think we should do the same for your own city.

    Reply
  4. Strive Masiyiwa Post author

    Afterthought:
    As an entrepreneur you need to see a Stock Exchange as the ULTIMATE place to raise capital for your business. Even if your business is still very small, it must become part of your vision to one day list on the Stock Exchange.
    The best Stock Exchange is one which operates as a business rather than as either a regulator, or a club for special interests groups like Stock Brokers.
    Serious investors stay away from exchanges run or heavily regulated by governments. I would too.

    Reply
  5. Strive Masiyiwa Post author

    Afterthought:
    As an engineer I was trained to understand how a “dipstick” to check oil, can tell you everything you need to know about the health of a car’s engine.
    A venture capital investor for instance needs to be able to “exit” an investment by selling their shares. The best place to sell their shares after a few years is through the local Stock Exchange.
    “Dipstick”:
    Is there a working local Stock Exchange?
    How many new companies listed there last year?
    If answer to both questions is “zero”, investors look at other countries!
    Investors are not donors, so don’t confuse the two.

    Reply
  6. Strive Masiyiwa Post author

    Afterthought:
    I was talking to a very serious global investor in New York.

    “We invested $xxm, in a small African company in country yyy. We gave them a lot of support, and they have done very well. We must now exit, because we are a Fund. Who is going to buy these shares from us, and how do we get our money out of the country, after selling our stake?”
    I get asked this type of question all the time. Don’t try and answer if you are not in senior class

    Reply
  7. Strive Masiyiwa Post author

    Aletor writes,

    Please sir my mentor Masiyiwa… How can you advise someone like me with big dreams to start up a venture but has little or no capital at all to proceed with his career… Thanks and will be waiting to hear from you sir

    My reply,
    There are no shortcuts:
    You start with what you have now. I started with $75. You can work from your bedroom or even a shack on the street. You can get a market stall, or simply use a website.

    Reply
  8. Strive Masiyiwa Post author

    Akeyewale writes,

    Hi Dr Strive,

    Don’t you think we should have an African version of Shark Tank and Dragons’ Den? You and a few other friends can actually make this happen. We can call it Lions’ Den.

    We’d be empowering our people. It would also make good content for Kwesé… I could be of help.

    My reply,
    There will be an African version of Shark Tank on Kwese TV eventually.
    However it is important for all entrepreneurs to watch shows like Shark Tank for another reason:
    It is so important for entrepreneurs to get exposure to how real Venture Capital investors make their decisions on whether on not to invest in someone’s business. That is more important than the handful who actually get investment.
    Even if you don’t have a business it is important to watch this type of show. Also encourage young people and even children to watch this type of show because it sparks entrepreneurship at an early age.

    Reply
  9. Strive Masiyiwa Post author

    Franklin writes,

    Woah! It’s as if you are reading my platform or timeline. I have been ruminating on starting a venture capital in my city Abuja Nigeria for so long. I got back to dusting my business plan in December 2017 and I have been posting somethings on my timeline on venture capital for sometime now. I will surely check the website. Thanks.

    My reply,
    We need African cities to join hands with people like yourself to develop an environment for entrepreneurs to thrive and develop big businesses. I’m not looking to become a venture capitalist, but I want to see more venture capital in Africa. This is why I’m trying to get a deeper understanding.

    Reply
  10. Strive Masiyiwa Post author

    John writes,

    I think that’s the perfect opportunity for the business to regain full ownership by acquiring the assets of the exiting investor.. I’ll do that if I was in a position to

    My reply,
    If I own say 25% of a business with you, it is not possible for the business to buy me out.
    If you want to buy out your partner in a business you cannot use the money of the business because your partner also owns that business. It is usually illegal.
    You may have to borrow the money in order to buy out your partners first.
    It is actually harder than most people think.

    Think about it, and you will soon realize why.

    Reply
  11. Strive Masiyiwa Post author

    Terrance writes,

    Hello Mr Masiyiwa. Its my prayer request this year to see you responding to my commentary. Where can one find international investors who are interested in investing in natural resources. I wanna erect a massive quarry which will create 20k jobs.?
    Regards

    My reply,
    Every time I reply to a comment I reply to you!
    Just put your name on my comment:
    You see I choose comments which enable me to address issues that go beyond a specific person.
    If you study my comments you will find the answers to your particular question.
    Go and start a small business with the little that you have, and begin to prove yourself as an entrepreneur first, before you prove yourself as a visionary:
    “20,000 jobs “ is a big vision, now show yourself to be an entrepreneur who can successfully employ 20 people, and grow it, and investors will flock to you. Then you will be like Aliko Dangote.

    Reply
  12. Strive Masiyiwa Post author

    Ogunbona writes,

    Why would you want to exit if you are making cool profit? There is no smoke without fire.

    My reply,
    That is a good question. What it tells you is that you do not yet have the fullest understanding of why some investors will put money into a business. I need you and those who have a similar question to go and do further research into this matter. If you get the answer you are on your way to being positioned for investment when you need it.

    Reply
  13. Strive Masiyiwa Post author

    Akeyewale writes,

    Entrepreneurs need to understand that an investor’s ‘money’ may not actually be his. He may just be a custodian. In some cases, the money is the hard earned savings of probably some pensioners.

    Therefore, liquidating your investment doesn’t necessarily mean there is a ‘fire’.

    My reply,
    This is usually the case. It is always important to understand the type of investor from whom you are getting the money.

    Reply
  14. Strive Masiyiwa Post author

    Zewelanji writes,

    Any reason why raising money through stock exchange is the ultimate?I have noticed more growing companies opting to stay private especially if they can raise financing from VCs

    My reply,
    Accessing Venture Capital is an intermediate stage, accessing Capital Markets must be your ultimate goal:

    Millionaires are made by Venture Capitalists, but billionaires are made by Capital Markets (Stock Exchange listings)!

    Reply
  15. Strive Masiyiwa Post author

    #Policy matters on this issue!

    If you are a leader of a country or central bank Governor, you must be able to answer this question quickly and unequivocally, based on “best practice globally”, otherwise serious investors will not come. This guy I was talking to controlled almost $100bn in global investment!

    Afterthought:
    I was talking to a very serious global investor in New York.

    “We invested $xxm, in a small African company in country yyy. We gave them a lot of support, and they have done very well. We must now exit, because we are a Fund. Who is going to buy these shares from us, and how do we get our money out of the country, after selling our stake?”
    I get asked this type of question all the time. Don’t try and answer if you are not in senior class.

    Reply
  16. Strive Masiyiwa Post author

    Many people have struggled with this Afterthought question. If you cannot answer it, most investors will walk away if they are international investors, even if you have just created the next Google!

    After the final part of this series, I will do a special post on it.

    Afterthought:
    I was talking to a very serious global investor in New York.

    “We invested $xxm, in a small African company in country yyy. We gave them a lot of support, and they have done very well. We must now exit, because we are a Fund. Who is going to buy these shares from us, and how do we get our money out of the country, after selling our stake?”
    I get asked this type of question all the time. Don’t try and answer if you are not in senior class.

    Reply
  17. Strive Masiyiwa Post author

    Katie writes,

    Onias xxx, Swissgold is close to MMM so I advice you do what you see with your eyes and know very well. Study any business you intend to go in. Thanks

    My reply,
    I had thought to write something like:
    “A fool and his money are soon parted”!
    Be careful guys. Don’t look for easy money with things you don’t understand. The Internet is a wonderful place, but never forget that there are people there waiting to rob the unsuspecting.
    Everyday our people scan this site to remove adverts from scammers trying to get to some of you!
    Be alert for fraudsters all the time.

    Reply
  18. Strive Masiyiwa Post author

    Ejiro writes,

    Yes, they are good. I just finished reading “Start up Nation” which highlights Israel’s entrepreneurs and venture capital funding. I have been thinking why can’t we replicate same to some extent here in Nigeria.

    My reply,
    I have began the process of understanding how it was done. It can be done even in Nigeria.
    Amongst other things I will be inviting key leaders in Africa to share my observations.
    I don’t want to talk too much at the moment.
    It is a good thing that you read the book. Others should do the same, so that as we begin to execute the strategy I have in mind they can be part of it.

    Reply
  19. Strive Masiyiwa Post author

    #Start Up Nation visit:
    We just returned from an amazing trip to see the “eco-system” that is used to support entrepreneurs in Israel.
    My wife and I also had several meetings with the author of the book Start Up Nation, Saul Singer and his wife Wendy.

    I want Africa to have the same “eco system” so our own entrepreneurs can get easy access to capital and expertise to build their businesses.
    This is how we are going to create jobs!
    “Watch this space”.

    Reply
  20. Strive Masiyiwa Post author

    Afterthought:
    As an entrepreneur you must make yourself an expert of Stock Market including the one in your country. If there is no Exchange in your country you must lobby for one to be set up.
    Imagine if your country had no markets where farmers could sell their produce?!
    Or if there was no where for traders to sell their goods?!
    There SHOULD be no difference in SUBSTANCE between the Nigerian Stock Exchange and the Ikeja Market for traders!
    Or Zimbabwe Stock Exchange and the Mbare Msika Market!
    #Lets keep things simple, so everyone can understand and benefit.

    Reply
  21. Strive Masiyiwa Post author

    #The Audacity of faith!

    We build our understanding “precept upon precept”:
    When you look at my journey, it took 12 years from the time I started to when I finally managed to get a company listed on the Stock Market.
    What is important is that I held that as a vision for at least a decade!
    I would always say to people, “I’m going to get my company listed on the Stock Exchange”!

    During that time I followed what happens there as though I was already a part of it. Now you understand why I want you to go and buy some shares in a company in your country. It does not have to be much.

    When there is an IPO register to buy shares and follow the process.
    This is all practice for your own IPO, even if you do not even have a company yet!

    Reply

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